Calculation method of weighted average cost of capital
The calculation method of WACC is: WACC=(E ÷ V) × Re+(D ÷ V) × Rd × (1-Tc).
Wherein, Re is the cost of equity;
Rd is the cost of debt;
E is the market value of the company's share capital;
D is the market value of the company's debt;
V=E+D;
Tc is the enterprise tax rate;
(E ÷ V) is the percentage of equity in total financing;
(D ÷ V) is the percentage of debt in total financing.
Weighted average cost of capital (WACC) refers to the total cost of capital calculated by weighted average of the capital cost of various long-term funds based on the proportion of various capitals in the total capital of the enterprise. Weighted average cost of capital can be used to determine the required rate of return of investment projects with average risk.